Data released today by the National Institute of Statistics show solid momentum in the retail sales volume (a barometer of private consumption) in July.

Compared with June, the index rose 1.2% in July, with food/beverages/tobacco up 1.7% month-on-month and non-food sales up 2.8% month-on-month. Fuel sales also advanced 0.6% month-on-month in July.

Year-on-year growth in retail sales accelerated to 10.1% in July from 6.9% in June. Non-food sales rose 13.8% year-on-year in July, up from 9.1% year-on-year in June. Sales of food/beverages/tobacco also accelerated to 6.1% year-on-year in July, from 2.5% year-on-year in June. Lastly, retail sales of motor fuels in specialised stores increased 9.7% year-on-year in July, easing from 10% year-on-year in June.

As a result, in the first seven months of this year the retail sales volume was up 8.1% year-on-year. Fuel sales rose 10.7% year-on-year, an evolution also influenced by the removal of the additional excise duty on fuels as of 1 January.

At the same time, non-food sales advanced 10.6% year-on-year, supported by higher real disposable income, faster RON lending and rising real estate and financial asset prices.

Sales of food/beverages/tobacco also increased by 3.8% year-on-year.

Looking ahead, we expect the pace of retail trade and of private consumption as a whole to moderate, as the impact of the New Fiscal Code dissipates and tensions and uncertainties build in economic policy, with implications for funding costs (upward pressure).

Indeed, in recent months retail sales have been growing below potential, and the authorities have announced the reintroduction of the additional excise duty on fuels this autumn (in two steps of 16 bani per litre, from 15 September and from 1 October).

In BT’s baseline macro scenario, we forecast a slowdown in annual private consumption growth from 7.4% in 2016 to 7.1% in 2017 and 4.4% in 2018.